NASA DEFENDS ORION CONTRACT AWARD 

GAO: Too Many Design, Risk Unknowns for Such a Long-Range Contract

WASHINGTON, September 28, 2006 – At a Science Committee hearing today examining the recent contract award to Lockheed Martin to build the space exploration vehicle that will ferry astronauts to the Moon, Mars, and beyond, the head of the exploration program at the National Aeronautics and Space Administration (NASA) promised to provide the Committee with frequent updates on the program’s progress to enable robust Congressional oversight of the multibillion dollar development project.

The official also defended NASA’s decision to enter into a long-term contract for the development and production of the new Crew Exploration Vehicle (CEV), now dubbed Orion, saying it had a sufficient level of confidence in both the vehicle’s design requirements and cost estimates.  The contract, which was signed on August 31, is worth, including all options, approximately $8.1 billion through 2019. 

However, the Government Accountability Office (GAO) said too many outstanding questions regarding vehicle design needs and project risks remain unanswered and that NASA should have pursued a series of shorter-term contracts with clear milestones for completion.  In July, GAO issued a report, requested by the Science Committee, that faulted the agency for pursuing a long-term contract for Orion before reaching an appropriate level of understanding of the design and program risks.  In response to the GAO report, NASA revised its then-pending contract with Lockheed to address some of GAO’s concerns.

Science Committee Chairman Sherwood Boehlert (R-NY) took a moderate approach to the Orion contract, saying, “GAO believes that NASA should not have let as extensive a contract as it did, given the uncertainties, and they make a plausible case.  NASA has made reasonable arguments in response, and the contract has been let, so we don’t have to rehash that issue here. 

“What we do have to learn at this hearing is:  what should Congress be doing and what information we should be seeking to exercise strict oversight as this project moves forward?  And, what additional steps should NASA be taking to make sure that project costs do not escalate?” [Chairman Boehlert’s full opening statement follows.]

“I applaud NASA for their timely schedule of procurement for this major undertaking,” said Space and Aeronautics Subcommittee Chairman Ken Calvert (R-CA).  “I believe NASA has a more advanced state of knowledge than the agency has had for many of their earlier procurements.  In addition, the NASA acquisition strategy for the Vision [for Space Exploration] is more flexible and has built in incentives, options, and provisions for termination if necessary.  The aim is to improve contractor performance.”

GAO’s report from July, NASA: Long-Term Commitment to and Investment in Space Exploration Program Requires More Knowledge, says “NASA’s current acquisition strategy for the CEV places the project at risk of significant cost overruns, schedule delays and performance shortfalls because it commits the government to a long-term product development effort before establishing a sound business case.”  

Dr. Scott J. (Doc) Horowitz, NASA’s Associate Administrator for the Exploration Systems Mission Directorate, told the Committee that NASA did not agree with the report’s overall findings, but that the agency still had implemented recommendations, including making long-range aspects of the contract into options.  “On the contract side, we have, after discussions with GAO, made the Schedule B and Schedule C portions of the contract into options.  Phase Two preserves NASA’s flexibility to terminate the contract at Orion’s preliminary design review if cost projections are determined to be unaffordable and non-executable.” 

Dr. Horowitz also promised to provide regularly updated information to the Committee on the status of the Orion development effort.

Testifying on the findings in the GAO report, Mr. Allen Li, Director of Acquisition and Sourcing Management at GAO, said “[W]e found that NASA’s acquisition strategy for the CEV was not based upon obtaining an adequate level of knowledge when making key resources decisions, placing the program at risk for cost overruns, schedule delays, and performance shortfalls.  These risks were evident in NASA’s plan to commit to a long-term product development effort before establishing a sound business case for the project that includes well-defined requirements, mature technology, a preliminary design, and firm cost estimates.”

Chairman Boehlert delivered the following opening statement at the hearing:

I want to welcome everyone to today’s important hearing, this Committee’s first public discussion of the Crew Exploration Vehicle, or Orion, project since we had the Administrator before us in March, and the first review in Congress since Lockheed Martin was awarded the contract for Orion at the end of August. 

            Let me start by reiterating my support for the President’s Vision for Space Exploration, which I think is an important national undertaking.  And let me also reiterate my determination that NASA not become a single-mission agency; human space flight can’t succeed at the expense of earth science, space science and aeronautics.

            So NASA has to move ahead with Orion deliberately, but also cautiously, and Congress has to keep a keen and constant eye on the project.  Neither the agency nor the nation can afford another Space Station – a project that, for all its technical magnificence, has seen its costs balloon while its capabilities shrank to near the vanishing point. 

            This may very well be my last hearing on NASA, but I hope we will have set a pattern of friendly, but rigorous vigilance that will be continued as the nation moves ahead with work on returning to the moon.

            I am pleased to say that NASA itself also seems to be operating at a high level of vigilance.  The agency is trying to base Orion on technologies that have already been used successfully in other programs.  And I am very glad to see that NASA modified the Lockheed Martin contract for Orion as a result of the Government Accountability Office (GAO) study this Committee requested. 

That is a great example of how sensible oversight can work to the advantage of the agency being reviewed, and frankly it’s a credit to this Committee, to GAO and to NASA that the contract was modified.

But that hardly closes the issues before us.  GAO correctly points out that NASA does not yet have a final design or cost estimate for Orion.  That’s not a criticism of NASA; that’s just where we are in the process, and Congress has to recognize how fluid the situation is – although far less fluid than at this time last year. 

GAO believes that NASA should not have let as extensive a contract as it did, given the uncertainties, and they make a plausible case.  NASA has made reasonable arguments in response, and the contract has been let, so we don’t have to rehash that issue here. 

What we do have to learn at this hearing is:  what should Congress be doing and what information we should be seeking to exercise strict oversight as this project moves forward?  And, what additional steps should NASA be taking to make sure that project costs do not escalate?

I look forward to getting answers to those key questions.  We have the right folks before us to get those answers, and I want to welcome Dr. Scott (Doc) Horowitz from NASA for his first public appearance before the Committee.  He meets with the staff all the time, and hopefully we won’t be as hard on him today as they are.

Mr. Gordon.           

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